The core essence of a marketing transaction is the exchange of value between two parties. Quite often, the exchange of value describes a customer purchasing a product from a company. When purchasing products, the exchange of value can often fail due to product defects or customer dissatisfaction. When the marketing exchange fails, customers often desire an avenue for recourse to right the exchange imbalance. Accepting and quickly processing product returns represents a strategic tool companies can leverage to maintain healthy relationships with customers, despite an exchange failure. Effectively managing product returns also benefits companies financially, by reducing inventory levels, costs, and the risk of product obsolescence. Despite providing both relationship management and financial benefits, numerous companies struggle to manage product returns effectively. In a time when companies are facing a growing number of product returns due to omni-channel retailing and online shopping, implementing an effective system to manage product returns has become a vital strategic tool necessary to maintain competitiveness. First, the current research answers the question of why do companies struggle with product returns? by identifying the important components of an effective product returns system. Informed by complex adaptive systems theory and based on a qualitative, grounded theory analysis, the current research finds that the hidden complex nature of managing product returns prevents numerous companies from implementing an effective system to mange returns. Managing product returns requires five important components (firm capabilities, employees, the returns management information system, organizational climate, and the customer service boundary), which interact with each other multiple times to process a product return. After identifying the important components and interactions within a product returns system, Essay I integrates the information together to form a substantive theory of the complexity of product returns management. The substantive theory implies that companies looking to improve their management of product returns need to understand and invest in multiple components within the product returns system. Second, the current research answers the question of how do the employees, returns management information system, and climate for creativity components of a product returns system relate to a firm’s flexibility, adaptability, and performance? To answer this research question, this dissertation empirically evaluates the role these three components play in shaping a firm’s flexibility, adaptability, subjective performance and relationship quality by analyzing data collected through an online survey with 102 US managers with experience in product returns. The empirical analysis indicates that employee decision-making resources show a statistically significant negative relationship with firm adaptability, while the firm’s climate for creativity and flexibility show a statistically significant positive relationship with firm adaptability. Firm adaptability shows statistically significant positive relationships with subjective performance and relationship quality. Firm adaptability acts as a partial or full mediator in all of these relationships. The combined findings of Essay I and Essay II point to the importance of product returns as a strategic relationship management tool. Firms that can effectively manage product returns give employees more flexibility to respond to problems, are better able to make structural changes, have higher subjective performance ratings, and better quality relationships with customers.

Innovation is a key factor for economic development and growth, and firms need to continuously innovate in order to stay competitive. However, innovation is complicated in today’s markets as there are many different aspects for companies to manage. The very first phase of innovation, the fuzzy front end (FFE), is critical and this phase presents one of the greatest opportunities of improvement for the overall innovation process. Yet, the research on this phase is limited. The new product development (NPD) and the FFE are different from each other and require different ways of thinking and working. The FFE is the phase that takes place before the structured NPD phase and it aims to develop a sustainable flow of ideas. All innovations are born as creative ideas and creativity is the production of new and useful ideas. Many stress the importance of the environmental variable climate as important for creativity and innovation. This thesis is a case study which aimed to investigate the climate for creativity and innovation at an innovation department at Arla Foods Sweden. The innovation department is working successfully with NPD but lately, the ideas that the innovation department has produced have been rather few and not good enough for the results they want to achieve. Therefore, this case study had the overall goal to find improvements areas regarding the climate for creativity and innovation in the FFE. In order to investigate the climate an established instrument, a questionnaire, was utilized. This gave an initial diagnosis of the climate for creativity and innovation at the department. Thereafter, interviews were carried out with each of the members of the department to gain in- depth understanding of the current climate. Additional interviews at Arla Foods were carried out to provide the results with a wider picture. Moreover two projects which took place in the FFE were observed to get insight of how professional consultants work with creating a favorable climate. The two managers of these projects were also interviewed. The results of this thesis revealed that the current climate is relatively favorable for working in the NPD while it is not favorable for the FFE. Thus, it was indicated that additional requirements are placed on a climate that are to be favorable for creativity and innovation in the FFE. For this specific case study, a number of dimensions (risk taking, idea time, dynamism/liveliness, playfulness/humor, idea support and encouragement, debates, and discussion) and underlying factors (input and inspiration, idea process, and clarity) that could be improved at the Innovation department were identified.